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A country occasionally needs to borrow from institutional and individual investors for budgetary purposes. Top officials, such as central bankers, may also engage in debt transactions on securities exchanges to implement monetary policies.
Debt Definition
Debt is a liability you must repay. It may also be a financial guarantee or commitment that you must honor on time. A short-term debt is a loan you must repay within 12 months. A long-term liability has a maturity date exceeding one year. Examples include loans, taxes and bills.
Domestic Debt Definition
Domestic debt, otherwise known as national debt, consists of liabilities that a country's citizens and government owe. For example, the United States domestic debt includes Treasury notes, bonds and bills. The U.S. debt also includes credit card debts, student loans, mortgages and business loans that individuals and corporations owe.
MIsconceptions
Domestic debt is distinct from sovereign debt. Sovereign debt products are bonds that a national government issues within a given country.
References
- Investopedia: What The National Debt Means To You
- Investopedia: Debt-To-GDP Ratio
- OECD. "Foreign Direct Investment FDI Positions by Partner Country." Accessed Oct. 14, 2020.
- S&P Global. "Intro to Credit Ratings." Accessed Oct. 14, 2020.
- Bureau of Economic Analysis. "Gross Domestic Product, 2nd Quarter 2020 (Second Estimate); Corporate Profits, 2nd Quarter 2020 (Preliminary Estimate)." Accessed Oct. 14, 2020.
- TreasuryDirect. "The Debt to the Penny and Who Holds It." Accessed Oct. 14, 2020.
- The World Bank. "Finding the Tipping Point--When Sovereign Debt Turns Bad." Accessed Oct. 14, 2020.
- U.S. Department of Treasury. "Major Foreign Holders of Treasury Securities." Accessed Oct. 14, 2020.
- Congressional Budget Office. "Federal Debt: A Primer." Accessed Oct. 14, 2020.
Writer Bio
Marquis Codjia is a New York-based freelance writer, investor and banker. He has authored articles since 2000, covering topics such as politics, technology and business. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management.